Making Money Through Real Estate: a How to Guide
One of the safest investments that you can make is in a property. You purchase a piece of land with a huge asset on it. Fortunately, housing prices very rarely decrease so even if you maintain a property, you should be able to make money from it. However, there is serious capital to be earned from earning property. One way to do that is to buy in a fashionable area such as California. This article will run you through the different ways in which you can make money in real estate with a focus on the West coast.
A Section §1031 exchange/ Starker Exchange
This is a tax deferral used by real estate investors. It allows you to put off paying the federal and state income tax that would usually be added to a property sale as long as you purchase another ‘like-kind property. A ‘like-kind- property is a wide and broad description of a property that is defined by the IRS as the same nature even if they differ in quality. This means that investment property can be exchanged though this does not apply to personal property.
But why would you do this? You can shift the focus of your investments moving from high maintenance costing building to a low maintenance building. Equally, it can help you move your business from one state to another. This is a complicated process however and each state can have its own rules. A quick guide to 1031 exchanges uniquely in California is needed if you want to conduct one on the West coast. They have their own rules that can ruin any plans you might have so read up on these before you commit to this kind of purchase.
Image Credit: Mark Moz via Flickr CC 2.0 – Making Money Through Real Estate a How to GuideIncreasing Property Value
Once you have purchased a property, you can only improve its property value. It usually appreciates in value on its own but that doesn’t mean that you cannot speed that increase up yourself. Developing your property by following the latest interior design trends or adding extra features to your property will allow you to profit massively on your house.
One way in which you can improve your chances of selling your property at a profit is to purchase it in trendy areas of the city and state. For example, in California, the area of Santa Monica has seen extensive development in recent years. Buying a house in this area will no doubt allow your property to soar in price. Looking out for these developing areas can help you purchase at a low price and then sell for much higher when the area becomes desirable.
Rental agreements
Renting out your property is one of the surest ways to make money from your real estate investment. Allowing renters into your property provides a steady stream of income every month. Also depending on where you have bought your property, you can charge higher amounts. City locations provide great ways to earn money. Rental charges can always cover your mortgage payments and still provide a tasty profit.
Though this does not come without risk. You will need to carefully interview your prospective tenants to make sure that your property will not be destroyed. Ideally, you want tenants who will be long-term and look after the property. If you are incredibly lucky, they may even take it upon themselves to improve your property, with your permission of course. Always make sure to vet your renters thoroughly to not only make sure they can pay but also that they are responsible for your property. You can always have regular inspections to make sure it is being looked after.
Mortgage notes
This can be a really good investment for those seeking a more passive income. When a mortgage note is purchased, you receive monthly payments that include interest and principle. It is a steady income, but you don’t need to maintain the property as you would as a landlord. It can last for up to 30 years.
You can even increase the value of your mortgage note by buying from a distressed note holder. If you find someone who needs the money immediately, you can buy the note for cheaper than usual.
Flipping investment properties
Investing in an under-priced home that needs some DIY and renovation can yield huge amounts of profit. If you can renovate your property as inexpensively as possible then there is a real chance that your property will make a tidy profit. There is a high risk here because you may make a problem worse if you don’t have the skills to do the renovations. Also, interior design is always subjective. Something that you think might look good, may turn off potential purchases. It can be tricky to work out where the trends are going.
Another fear that you may have is that the longer you hold a property, the longer you don’t make any money on it, yet it will continue to cost you money. Equally, if the work that the home requires is more significant than you thought, you could end up leaking more money than you had really planned for. You need to make sure that you do your research on the market as well as on the home you intend on buying. You don’t want to be caught out and having to keep a home you wanted to flip.
Investing in Real Estate
As far as investments go, real estate is one of the safest ones to go for. It is unlikely that you will lose money on a property as apart from the financial crash of 2008, house prices have always been on the rose. There will always be a need for homes and so whether you decide you want to sell or rent out a property, you can be fairly sure that you can make money from it. However, there are numerous ways to make money from the property so do your research and get out there.